2023 Economic and Fiscal Outlook and Tax Update Development Spending Increased to $97 Billion

According to the "Economic and Fiscal Outlook and Taxation Update 2023" report, although the national revenue is expected to fall by 1% to RM291 95 billion ringgit, a full 2 ​​billion ringgit higher! The report pointed out that the funds will be mainly used to promote high-quality development projects, with the goal of attracting key investments and further boosting economic growth.

In addition, the government is also committed to setting aside US$3 billion (approximately RM13 3 billion) to redeem 1MDB bonds due to mature in March this year, as well as other public-private partnership programs (PPP) and private financing activities (PFI) commitments.

Economic Development Expenditure: Received the most funding, reaching RM55 billion, focusing on promoting national economic activities, which is RM900 million higher than the RM54 1 billion announced in the original report; funding is mainly used for transportation, crops, energy and public utilities.

The transportation subsector benefited the most, receiving RM17 6 billion or 18.

1%; Crops Received Rm3 3 Billion Or 3

4% Energy And Utilities Received Rm3

2 Billion, Or 3 3%

Social sector: Received RM26 5 billion, accounting for 27.

4%, Which Is Rm1 3 Billion Higher Than The Rm25

2 billion announced in the original report More than half of the total appropriation is used in the field of education and training, mainly including the provision of technical and vocational education and training, research funding, and the construction or expansion of schools and other purposes.

About RM4 9 billion will be allocated to the healthcare sector to focus on building or upgrading the medical system, while RM2.

1 billion will be allocated to the housing sector to build affordable housing National security sector: Internal defense will receive RM11.

5 billion in funding, which is RM700 million higher than the RM10 8 billion announced in the original report.

Of this, 6 4 billion will be used to secure the field, while the rest will be used to enhance internal security.

Administrative field: Only RM3 9 billion was allocated, which is RM1.

1 billion less than the RM5 billion announced in the original report It is mainly used to upgrade information and communication technology (ICT) to improve the productivity and quality of public services.

Administrative expenditure is expected to be 289 1 billion.

This year's administrative expenditure is expected to reach 289 1 billion ringgits, accounting for 15.

3% of GDP, which is 16 8 billion ringgits higher than the 272.

3 billion ringgits announced in the original report, but compared with 2022, it is actually a decrease of 1 2%.

The report pointed out that the decline in administrative expenses is mainly due to the expected gradual slowdown of commodity prices and the reduction of subsidy allocation after the implementation of the targeted subsidy mechanism However, statutory remuneration mechanisms, retirement costs, debt service charges and grant allocations are expected to remain high.

Administrative expenses and remuneration: Accounting for the largest part of administrative expenses, it is expected to increase by 3 4% to 90.

8 billion ringgits, mainly the salaries, salaries and allowances of civil servants, etc , and also the contract work mechanism in some fields, such as the transfer of medical and education personnel to full-time jobs .

Debt Service: Expected To Grow By 11 7% To Rm46

1 billion, and the high debt is mainly to cope with the ravages of the epidemic Pensions: A total of RM31.

1 billion, about 76 9% of pension expenses are paid to retirees and beneficiaries.

According to the United Nations, Malaysia has become an aging country, and the pension burden is expected to expand further Therefore, the government is exploring schemes such as contribution ratios to effectively manage pension distribution in the future.

Supplies and Services: Expected to decrease by 7 7% to RM32 billion, mainly due to reduction in provision by the government for non-professional services.

Subsidies and social assistance: expected to decrease by 12 9% to RM58.

6 billion, mainly due to lower global gasoline prices, which is also in line with the government's transfer of funds to targeted subsidy mechanisms However, the government will continue to provide cash and welfare assistance to ease the burden on low-income groups.

The total expenditure was lowered to 386 1 billion.

According to the "2023 Economic and Fiscal Outlook and Tax Update", the government will allocate 386 1 billion ringgits for expenditure, although it is 13.

8 billion ringgits higher than the 372 3 billion ringgits announced in the original report, but if it is compared with 2022 Compared with the previous year, it decreased by 2.

3% The report pointed out that the amount has declined, mainly because the Covid-19 Fund has ended at the end of last year, so there will no longer be any appropriation into it.

In the budget for fiscal year 2023, in addition to allocating RM97 billion for development expenses (25 1%), another RM289.

1 billion (74 9%) will be used for administrative expenses.

As far as overall consumption is concerned, 35 2% of expenditures are spent on social projects, 19.

1% are economic expenditures, 9 7% are allocated to national security expenditures, general administrative expenditures account for 5.

1%, and the remaining 30 9% are bill payments and transfers.

Malaysia unveiled its largest-ever budget before parliament dissolved, with an eye on consolidating growth momentum this year and laying the groundwork for a stronger recovery next year At the same time, the caretaker government pointed out that there are uncertainties in the outlook for 2023, so Malaysia's economic growth is expected to be 4% to 5% next year.

1 The Deficit Will Be Reduced From 5

8% To 5 5% Of Gdp In 2023

Impact: Favorable credit ratings and bonds Expenditure budget for 2023 is RM372 3 billion, slightly down from 2022 due to the end of the temporary financial aid for the Covid-19 pandemic.

In addition, the government has set a fiscal deficit of RM99 billion in the 2023 budget, which means that the deficit will improve to 5 5% of GDP (5.

8% in 2022) We believe that this is a positive development.

Widening fiscal deficits have been a concern for global rating agencies and investors in the past, and an improvement in 2023 should bring much-needed reassurance to investors and bode well for the country's credit rating 2.

Increased development costs by 33 4%, reaching a record high of 95 billion ringgits.

Impact: The domestic economic, stock and bond development expenditure will exceed 25% of the total budget for the first time in 13 years, the highest in the past 5 years, and is consistent with the development goals of the 12th Malaysia Plan This is a good thing for the local economy and the capital market.

Views on various sectors: Automobile impact: Import duty and excise tax exemptions for positively packaged and imported (CBU) electric vehicles will be extended until the end of 2024 Meanwhile, the EV import approval permit (AP) exemption will be extended until the end of 2023, while EV charging equipment manufacturers will receive 100% statutory income tax exemption and 100% investment tax relief for the 2023-2032 tax year.

We are bullish on the EV sector amid the government's supportive policy measures Construction and Infrastructure Impact: Positive We see the construction industry as one of the beneficiaries of this Budget.

First development spending is the highest this year, and then we have heard more clear progress on some of the major projects underway, including the East Coast Rail Link and the third line of the MRT In addition to this, construction companies will benefit from flood protection projects, new and upgraded existing hospitals and educational facilities, and the outlook for orders will improve.

Although no new large-scale projects have been announced in the Budget, we do think that small and medium-sized construction firms can continue to benefit somewhat from higher development spending Consumption impact: The aggressive budget proposal to hand out more cash will provide a strong boost to the consumer staples sector.

As widely expected, the people-centred budget provided substantial subsidies and support, including tax cuts and one-off cash handouts, to ensure the post-coronavirus recovery is sustainable We believe that lower income tax rates and fiscal assistance, especially support for B40 and M40, will continue to be the backbone to support domestic consumption amid rising inflationary pressures.

In addition, the easing of travel restrictions and more incentives will further expand domestic consumption levels Among consumer stocks, we prefer consumer staples over consumer discretionary, as we expect inflationary pressures and macroeconomic headwinds to continue to reduce willingness to spend.

Alcohol and Tobacco Impact: Negatives The absence of an excise tax hike on alcohol products and the government's vow to crack down on illicit trade have been recent catalysts for the alcohol industry Also, while there have been no major announcements negatively impacting the area of ​​sin (alcohol and tobacco) (taxation of the alcohol industry in our country is one of the highest in the world), we believe that the government is gradually implementing import duties and sales taxes on nicotine treatments Restrictions such as exemptions to encourage people to quit smoking send a bad signal to the field.

That said, we have a negative view of the industry, taking into account the growing global emphasis on environmental, social and governance (ESG) and long-term government initiatives that have clouded the outlook for the sin sector Healthcare Impact: Positive The government plans to allocate RM20 million to promote Malaysia as a mecca for medical tourism, which is positive news for the healthcare industry, especially the hospital industry.

The RM11 million screening subsidy (mammogram/Pap smear) offered to enhance women’s well-being is likely to boost the health sector’s revenue outlook In addition, the increased procurement of local medicines and the expansion of tax incentives brought about by the Budget plan will benefit pharmaceutical companies.

Conclusion: The pros outweigh the cons Overall, this is an expansionary budget that does more good than harm In our view, there should be positive moves in the stock and bond markets.

Despite macroeconomic headwinds, we still believe that the Malaysian economy is on the right track Video recommendation:.